Of cliches, common sense, and clarity.
Seldom tempted to join with journos in their sometimes precarious grasp of the issues facing the financial services industry, and to be honest, the opening of this piece by Diana Clement in last Saturdays's NZ Herald did little to change that view. The usual caterwauling and prattling on about advisers - or as the author insisted - "agents" - lining their pockets at the expense of clients, greedy intermediaries, etc., etc.
Reference to the FMA's report on churning - "...up to 200 appeared to have questionable sales practices" is a distinctly unsafe conclusion.
For a start, the Report refers to 1100 advisers - not 1000 as the Herald piece claimed (see page 12 of "Replacing life insurance - who benefits?" - FMA, June 2016).
The report further refers to advisers who recorded a 12% lapse rate and a 12% new business rate in one year.
This figure is arbitrary and has no real baseline statistical significance, other than ensuring considerably more work for the regulator.
Out of 100 clients in a portfolio, it's not difficult to contemplate this level of lapse - through no fault of the adviser.
Clients change banks and forget to update the direct debit; clients get pinched by other intermediaries or institutions (not included in the FMA investigation); clients move town and lose contact with the adviser; clients emigrate; the insurance policy is no longer needed (divorce, kids up and away, mortgage repaid, etc.); and regrettably, clients die.
So for a variety of good reasons, I submit the 12% is unreliable as a measure of "sales practices" - questionable or otherwise.
I wholeheartedly agree that the 54 advisers who recorded more than a 20% replacement rate have some explaining to do - that's 5% of those investigated and 0.65% of the total non-QFE adviser population.
These figures are not indicative of an industry in crisis. Still unacceptable, I agree, but by no means the scandal implied.
So reading through the article, the usual cliches were appearing, and I was about to move on to the Cryptic, when lo and behold - a miracle! From the depths of the outraged bluster and hackneyed phrases, a glimmer of common sense flickered - challenging conventional journalistic wisdom (sic) -
"Advisers aren't the only ones to blame for the churning that happens. Insurers are driving this behaviour as well, offering ever greater commissions and rewards as well as tweaking their policies to encourage advisers to churn the customer base yet again."
Heaven forbid that insurers should deign to improve their offering in this highly competitive environment - but let's leave that for another day.
Here's someone in the media taking the time and effort to point out that there are more than two parties to the contract, and that they may have some measure of responsibility in ensuring that the contract is established in a fit and proper manner!
And it didn't stop there!
A little further on some clarity was suggested to avoid the "he said - she said" dispute scenario -
"But my advice is that people should record the conversations they have with financial services industry staff, including bank staff."
Presumably (hopefully), Ms Clement meant to include advisers in the financial services industry staff category.
But the suggestion of recording the conversation and the documents that were included in the transaction creates so much clarity around the issue as to be dazzling.
(Any readers looking for advanced client/adviser communication technology to facilitate this - please click here - OK, commercial over.)
So in this commentator's humble opinion, Ms Clement qualifies for a standing round of applause - despite the cliches, the common sense and clarity are worthy of acknowledgement and praise.